Chinese Investment in Nigeria

Given that Nigeria has the second largest economy in Africa and that its population of almost 160 million includes one out of every four or five sub-Saharan Africans, the Chinese presence is relatively anemic. A press report of an exchange between Rong Yansong, the economic and commercial counselor of the Chinese embassy in Abuja, and Samuel Ortom, the Nigerian minister for trade and investment, provides a window into some of the issues.

Yansong claimed that Chinese enterprises in Nigeria employ over forty thousand Nigerians. In a country as big as Nigeria, and where Chinese involvement is heavily in construction, this does not seem to be a large number. A long-standing Nigerian complaint is Chinese reluctance to use Nigerian labor, including the unskilled labor often required at construction sites in developing countries. Yansong appears to be responding to that complaint. He also said that the value of trade and investment between China and Nigeria is now 8.2 billion dollars and could reach ten billion dollars by the end for the year. For comparison’s sake, the value of U.S.-Nigeria trade in 2010 was about 34.6 billion dollars and U.S. direct investment (PDF) in Nigeria in 2009 was about five billion, mostly in the oil sector. Nigerians have long complained that the reality of Chinese investment in Nigeria does not match its rhetoric though.

The Nigerians also regularly complain that the Chinese destroyed the Nigerian textile industry by flooding the domestic market with shoddy textiles, which often enter the country illegally with the connivance of Nigerian customs officials. In response, where it is possible, the Nigerian authorities have tried to tighten enforcement of various inspection regimes for imports. In their conversation, the press reports that Yansong asked Minister Ortom to secure final Nigerian approval of a draft agreement on industrial inspection. In response, Ortom apparently assured Yansong that his ministry’s mandate is to ensure that Nigeria’s trade and investment environment is conducive for foreign investors. But the press does not report him as responding directly to Yansong’s request.

The Chinese are trying to develop their economic ties with Nigeria. But they must overcome the popular Nigerian perception that they are racist – hence their unwillingness to use African labor– and that they are predatory – hence the view that they destroyed the indigenous Nigerian textile industry. Chatham House has published a fascinating report on then-president Olusegun Obasanjo’s efforts to trade oil blocks for Chinese infrastructure construction – with a big off-the-top to finance his political ambitions. It all went to bits when Umaru Yar’Adua became president and annulled most (not all) of the contracts.

At times political entities and countries as such pursue and secure bilateral relations with other countries on the basis
that they are to secure their own national and strategic interests . Perhaps , the Nigerian government is not expecting to benefit so sudden from the relations they have forged with China. But it still is a shock finding that the Chines are utilizing such a small number or percentage
of Nigeria’ work force.
I like to think Nigeria has a people that is able and capable of
employing many skills they have in any capacity.
Perhaps , Nigeria must start to look within their shores and ascertain as to what they lack as far as skills are concerned and try to develop that instead of relying on foreign investment that seem to deprive many employment.
This is purely an opinion , but from your article I think it might have some validity .
As an African I find this exciting in one way or the other.
Should the West cease to pursue projects they have supported previously then you ‘ll have the East as a willing
partner to rally such projects for Africa .
The West should not slack or hesitate to support Africa .
China is a great country . This is partly due to the Chinese
way of being able to see an opportunity where many see a crises .

Posted by Anthony NwaforAugust 20, 2011 at 3:45 pm

I don’t agree with the analysis that the Chinese destroyed the Nigerian textile industry.

A combination of IMF mandated reduction of import tariffs, high exchange rate of the dollar with respect to the naira which made sourcing of industrial inputs prohibitively expensive, lack of adequate infrastructure (many of the textile mills are in the North, far from the business centers in the South), terrible electricity situation and the failure of the Nigerian Government to stick to clear policies on textile imports / discourage smuggling. These killed the Nigerian textile industry.

In fact, the Nigerian Textile Industry was close to dead / dying even before the Chinese were a factor and Nigerians were buying second-hand clothing from the US and Europe as far back as the 1980s.

Secondly, I’d expect a former US ambassador to defend US businesses. But I’d bet my last kobo that the Chinese directly employ more people in Nigeria than the Americans (after more than fifty years of contact). American investment in Nigeria is very heavily skewed towards the Energy sector and very little else.

(Take out ChevronTexaco, ExxonMobil, GE and a few professional service firms and you have very little left. A significant proportion of the staff here are contract staff who are paid very little compared to expatriate staff).

Thirdly, you cannot obtain a clear picture of Chinese investment in Nigeria by simply comparing figures. Were joint ventures between Nigerian firms and Chinese firms considered? I know of a joint venture between a local firm and a Chinese firm at Nnewi that employs close to 1,000 people. That is only one example.

This is not to say that the Chinese don’t have a lot of work to do in employing locals, but they can be forgiven – they are very new entrants with language barriers and they are now making significant attempts to recruit locals. Huawei, for example, heavily recruits locals and pays relatively well.

The most important point is not whether the Chinese employ more locals than US firms or whether the Chinese killed the Nigerian textile industry. The important point is that the dynamism lies with the Chinese and other emerging market economies.

I spent a quite a bit of time with Nigerian business people and the general sentiment is that the future lies in China and India. China can provide infrastructure at a fraction of the cost of the West, while India can provide services at a fraction of the cost of the West.

I’ll give you an example – I visited a large Cement plant in Central Nigeria late last year. While the physical infrastructure was being installed by the Chinese (with some input from the Germans), the managerial and technical expertise was being supplied by the Indians.

Let me be the first to admit that I am not as smart as the analysts at Chatham House or CFR (I am only a bloody engineer), but my uninformed analysis leads me to ask a question: “Will the West still be competitive in Africa in a generation’s time?”.

Posted by Anthony NwaforAugust 20, 2011 at 4:04 pm

I forgot to add that the Nigerian Construction Industry is not dominated by the Chinese. The Germans are still major players here.

Less informed readers may be tempted to jump to the conclusion that what obtains in Angola, Ethiopia, Kenya, Rwanda etc., (Chinese dominance in the Construction Industry) also applies in Nigeria.

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